LNG firm cuts payments to Passamaquoddy

SIPAYIK, Maine - In the latest twist in efforts to build a liquefied natural gas terminal on Passamaquoddy Indian land, an Oklahoma-based company has announced it will postpone or withdraw its application from a state review process, and will stop quarterly lease payments to the tribe.

Quoddy Bay LNG Project Manager Brian Smith wrote to the state;s Board of Environmental Protection July 23, asking for ''another postponement'' until January 2009 of a pre-hearing conference on its proposal to construct an LNG plant on Passamaquoddy land at Split Rock, a natural beach area on the Atlantic Ocean coast with historical, cultural, religious and recreational significance to the tribe.

''After internal discussion, we have decided to request another postponement with the understanding that if we are not able to make this timetable we will request that we be allowed to withdraw without prejudice and then refile when ready to move forward with a full review of the application,'' Smith wrote.

On the following day, July 24, Don Smith, the president of Quoddy Bay LNG and Brian Smith's father, issued a press release announcing it had recently informed the Passamaquoddy Tribe that ''it is putting a temporary hold on quarterly lease payments'' to the tribe. He said the company has been paying the tribe $46,875 each quarter, which is split between the reservations at Sipayik and Indian Township. The company has paid the tribe almost $800,000 since March 2007 ''in lease and other bonus payments.''

In May 2005, the tribal government signed a 50-year lease agreement with Quoddy Bay LLC, which plans to construct the LNG terminal on three-quarters of an acre of tribal land at Split Rock. The lease included four distinct phases: permitting, construction, operations, and removal and remediation.

The BIA approved the lease June 1, 2005, ''solely for the site investigation required for the federal Energy Regulatory Commission permitting process in the development of an environmental impact statement,'' according to court documents. The BIA said that the site investigation did not require an EIS before the lease was approved, and that continuing the lease would be contingent on Federal Energy Regulatory Commission (FERC) approval.

But a group of Passamaquoddy members called Nulankeyutmonen Nkihtahkomikumon (We Take Care of Our Land), who oppose the project on the grounds that it would destroy tribal land that is used for traditional ceremonies, community events and recreation, sued the BIA in November 2005. The lawsuit alleged that the BIA failed to comply with federal laws in approving the lease, and that the lease was entered into without proper community input. During the course of the federal government's appeal to dismiss the lawsuit, the BIA conceded that in approving the lease it had actually approved the entire LNG project.

In early July, the case was back in front of a U.S. District Court judge, who indicated the case could move forward by the end of the year.

But Smith is now claiming in his press release that the BIA has not yet approved the contract and, therefore, the company is not obligated to make payments to the tribe. The $800,000 payments he claims the company has already made to the tribe were ''voluntary,'' he said, and the company intends to ''voluntarily resume these quarterly payments when it resumes the active review of its pending applications at the FERC and the State of Maine, which is expected to be in a few months,'' Smith wrote.

Last spring FERC suspended its review of Quoddy LNG's application because, for more than a year, the company had failed to provide information on key issues of the proposal.

In April the Board of Environmental Protection granted an earlier request from Quoddy Bay to delay the hearing until September with the stipulation that any amendments to its pending application be filed by the end of July. The company was not able to meet that deadline.

The company faces other formidable obstacles, including the government of Canada's formal opposition to letting LNG tankers through its waters at Head Harbor, a narrow waterway that is the only route that would allow the ships access to the proposed terminal site.

Hilda Lewis, a member of the tribal council at Sipayik, said the council was discussing the latest developments, but she could not comment further.

Lewis is a member of Nulankeyutmonen Nkihtaqmikon and has taken a lead in the opposition to the LNG project. The group is affiliated with Save Passamaquoddy Bay, a three-nation grassroots organization that includes the Passamaquoddy members, and members from both sides of the U.S.-Canada border.

Robert Godfrey, a Save Passamaquoddy Bay founder and webmaster of its information-packed Web site at www.save passamaquoddybay.org, said that the LNG project may be folding.

''I think it's pretty clear they don't have a project. That's why FERC suspended the permit application. Of course, they're still not gone, but just watching what's happening and now their refusal to pay their lease payment is an indication there's something seriously wrong whether it's money or they're just not being up and up with the tribe,'' Godfrey said.

The company may be in a corner regarding the lease, Godfrey said.

''Either they do have a lease and they owe the money to the tribe, or they don't have a lease at all and they can't do anything,'' Godfrey said.

If the lease is not valid, the state would be obligated to throw the company out of the state process, because they would have no right to the land, Godfrey said.

Quoddy Bay's is one of three proposals for LNG facilities in eastern Maine. Downeast LNG has filed an application to build a facility in nearby Robbinston, and a third group has proposed a facility in Calais.